Alibaba Goes To US Stock Market

Alibaba’s headquarters in Hangzhou, China

Alibaba’s headquarters in Hangzhou, China

Alibaba’s headquarters in Hangzhou, China
The Chinese e-commerce behemoth  Alibaba Group filed paperwork on Tuesday in the United States to sell stock to the public for the first time, in an embrace of the global capital markets that represents a coming-of-age for China’s booming internet industry.

‘Alibaba is the  fastest-growing internet company  in one of the fastest-growing economies in the world,’ said Sameet Sinha, an analyst with B. Riley & Company, a boutique investment bank in Los Angeles.

‘They are like an  Amazon , an  eBay  and a PayPal.’

In the filing , Alibaba said it intended to raise $1 billion in an initial public offering-a figure used to calculate its registration fee.

But the company is expected ultimately to raise $15 billion to $20 billion, which would make it the biggest American I.P.O. since Facebook ‘s $16 billion offering in May 2012.

When it makes its debut on the  New York Stock Exchange  or the Nasdaq market, Alibaba is also expected to have a share price that could  value the company at roughly $200 billion  — more than the market value of Facebook, or eBay, although still trailing that of  Google  or  Apple .

The immense size of the offering means that Alibaba shares will probably find a home in a broad swath of mutual funds and pension funds — and thus indirectly in the portfolios of small investors around the world.

Wall Street has been eagerly awaiting the Alibaba I.P.O., seeing it as perhaps the best chance yet to buy into China’s growth.

Online shopping there is expected to grow at an annual rate of 27 percent, according to the iResearch Consulting Group, and Alibaba is the leader in that area.

In China, Alibaba’s brands are household names. It operates an online shopping center, Tmall, where global companies like  Walt Disney , Apple, L’Oréal,  Nike  and  Procter & Gamble  have set up virtual storefronts to sell products directly to Chinese shoppers. Another of its sites, Taobao, is aimed largely at small Chinese firms that want to sell items to Chinese consumers.

American companies like Google and eBay can only dream of making the kind of profit margin that Alibaba enjoys.

In the 2013 calendar year, Alibaba had net income of $3.56 billion on revenue of $7.95 billion. That translates into a profit margin of roughly 45 percent. In comparison, eBay mustered a 17.8 percent margin.

Alibaba has much higher profit margins than American Internet companies because its costs are low, analysts indicated.


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